Paper 1 · June 2009 · Exchange Rates and International Trade
A favourable movement in the terms of trade implies that the
Acurrency has been devalued.
Bprices of exports have increased.
Cvisible trade balance has improved.
Dbalance of payments has improved.
Explanation
Terms of trade = (index of export prices / index of import prices) x 100. A favourable (improving) movement means export prices have risen relative to import prices.
ZIMSEC Economics Paper 1, June 2009, Q22